Moving object warps it
I downloaded the file.  When I went into Edit Mode, I couldn't select anything for some reason, so I wasn't able to test your exact problem, but I noticed that in Object Mode the whole cup does exactly what you're describing, and I figured out why it's doing that, and it would affect Edit Mode transformations as well.
You have snapping turned on; that's the magnet button up at the top of the viewport.  That is constraining the selection to your floor plane.  So you're trying to move it in the Z axis, but that is exactly what it cannot do while it's set to be snapped to the floor plane, and so it just moves in whatever axes it can.  Turn off snapping, and it behaves normally.